The Economic Scene of the Philippines.pptx

History

1. The Economic Scene of the Philippines. (Post-War to Immediate Post-EDSA I)

2. Premise Following the conclusion of the Second World War, the Philippines exhibited a fluctuating trend with regards to its economic growth and development. Although the country was blessed with an affluence of natural resources, an educated population/workforce, and operates a considerable industrial force, what was once deemed as a potential Asian Tiger turned out to be a sickly, frail gazelle as the country failed to maintain its pace alongside its Asian neighbors due to a hodgepodge of international and domestic economic woes, dilemmas and predicaments.

3. Immediate Aftermath of World War II (1946-1949) Estimated damages are as follows: Industries: ₱582 000 000 Domestic Assets: ₱798 767 595 Rice: ₱140 291 000 Sugar: ₱94 590 000 Livestock: ₱81 203 000 Mining: ₱121 210 000 There was a glaring struggle to rebuild devastated infrastructure. Approximately ₱ 40 Billion Pesos were invested to allow an efficient reconstruction and rehabilitation of the capital.

4. Immediate Aftermath of World War II (1946-1949) Foreign aid began to flow in, a sizeable amount of funding was provided by the United States, to be specific, a whopping $803 million through the Tydings Rehabilitation Act. To assuage the onerous debt that had to be eventually paid, the government resolved to institute the Bell Trade Act which: Prohibited the Philippines from safeguarding newly established industries that may prove to be in direct competition with US products. Voided import duties for US goods. Limited Peso-Dollar rate to ₱2:$1. Imposed quotas on PH export and free trade. Permitted US citizens and corporations unrestricted access and exploitation of public utilities and natural resources through the clause of Parity Rights.

5. The 1950s To spare the Philippine Economy from further plunging into the dark abyss of debt, control measures were introduced jointly by the Central Bank and Congress. Exchange control system: Depreciation of Peso-Dollar rate from ₱2:$1 to ₱2.40:$1. Government directed the stream of dollars to invigorate and sustain developmental projects. The Laurel-Langley Agreement, a revision to the unpopular Bell Trade Act, was approved. Under the Treaty, Filipino interests were given precedence, wherein the United States’ rights to manipulate the exchange rate, parity rights were amended to become reciprocal extended the sugar quota, extended the time period for the reduction of other quotas and for the progressive application of tariffs on Philippine goods exported to the U.S. Manufacturing volume and yield spiked and by the last year of the decade, the share it contributed on the overall national output doubled. Foreign exchange swayed towards the Filipinos’ favor on account of the Filipino First Policy, therefore allowing indigenous businesses to thrive and prosper in the midst of robust foreign contention.

6. The 1960s Controls and restrictions implemented in the prior decade were rescinded and therefore came the inevitable devaluation of the Peso from the promising ₱2:$1 to ₱3.90:$1. Among the beneficial consequences of this decision are: Broader field of financial business prospects. (Financial institutions saw a period of proliferation. There were 22 new banks with 111 branches from 1960 to 1967 compared to 7 new banks in the 1950s). Evolution of a Philippine money and capital market Refinement in the climate of foreign investment. The unfavorable ramifications include: Decline of the industrial sector. Import costs surged which then led to the withering of the industrial vigor. Trade deficit again dealt another blow to the economy.

7. The 1960s In view of the verdict to terminate the foreign exchange control scheme, the International Monetary Fund bestowed the Philippines with a substantial stabilization loan amounting to $300M. From a pre-existing national debt of $150M, we incurred a grand total of $650M by the middle of the 1960s. Although the primary architect of the import regulations law, President Ferdinand Marcos believed and insisted that decontrol law was a fundamental aspect of a free enterprise. Congress did not share his views. Following his re-election into office in 1969, Marcos finally conceded and admitted the flaws and inimical elements of the devaluation paradigm.

8. The 1970s Repercussions of the economical blunders previous decade were strongly felt by the turn of 1970s. Among the most conspicuous was the devaluation of the Peso from ₱3.90:$1 to ₱5.90:$1 and then subsequently to ₱6:$1. The Philippine Peso was subjected to a floating rate which means that the value it bears will be dictated by the market transactions. Cesar Virata , then Finance Minister, divulged that the aforementioned floating rate was one of the conditions the IMF pressed in order for additional loans to be granted.

9. The 1970s Debt accumulated to an astonishing $1 Billion. Consequently, a number of industrial projects such as Iligan Steel, Elizalde Steel Rolling Mills etc. had to be pulled from the plug. Far Eastern Economic Review: “When a country is in the throes of a political crisis as the Philippines is today, a floating exchange rate makes no sense.” In 1973, the Bureau of Investments saw fit to divert heavy industries from the Priorities Plan and instead focus emphasis on labor-intensive, export-oriented (LIEO) industries.

10. The 1980s Lamentably, by the first year of the new decade, the Philippines could not boast about the same success in the development of its basic industries compared to its Asian neighbors. Marcos’ 11 major projects (1979): integrated steel mill, petrochemical complex, copper smelter, phosphate fertilizers, aluminum smelter, diesel engine manufacturing, integrated pulp and paper, cement industry, expansion and rationalization of coconut industry and dev’t of non-conventional sources of energy. But the World Bank recommended caution in launching large-scale projects, substantial investments from gov’t. From 1973-1986, importation of luxuries reached a level 10x higher than South Korea’s Led by NEDA (under Solita Monsod ) and DOF (Jaime Ongpin), import liberalization was intensified. LIEO thrust was continued.

11. Post-EDSA In the wake of the People Power “Revolution”, the new Aquino administration ventured on an enterprise that prioritized on enticing foreign loans, aid, industry, trade and tourists. Decline of industrial growth from a modest 6.9% in 1989 to a dismal 1.9% in 1990. Despite the stagnant state of industrialization, growth rate increased from 1.9 percent in 1986 to 6.7 percent in 1988. Prevalent economic policies at the time mirrored those of the past that adversely affected the welfare of the Filipino People. Philippines incurred a colossal external debt of $28 billion. Instead of disavowing said debt, the administration honored it.

12. FVR Administration President Fidel V. Ramos launched an ambitious development paradigm known as “Philippines 2000”. The privatization of vital industrial components such as the sectors of electricity, telecommunications, banking, domestic shipping, oil etc. was the core of this endeavor. Further reformation of the taxation system and external debt was brought to more attainable levels through the debt restructuring and reasonable fiscal management. GNP rate increased to a rate of 7.2% while the GNP enjoyed a steady growth at 5.2%. Annual inflation rate plunged to 5.9% from an encumbering 9.1% in 1995. Re-adjustment of VAT (Value Added Tax) from 4% to World Bank mandated 10%. By the late 1990s, Philippine economic growth was at par with its Asian neighbors such as Taiwan, Thailand, South Korea and Malaysia. Philippine Economy took an abrupt downturn during the Asian Financial Crisis of 1997. However, as opposed to its neighbors, the Philippines fared much more admirably and the sitting president was praised for his brilliant and masterful handling of the predicament.

13. Thank you.